At some point, in your efforts to improve your circumstances, you’ve probably turned to the experts for advice. You might have looked to science for guidance on what to eat for weight loss or what psychology says will make you happiest. And chances are, you’re also confused.
One big problem with psychological research is what happens in the lab often stays in the lab. Not only is it nearly impossible to control all the variables, but sometimes the very act of measuring human behavior influences the outcome.
That doesn’t mean we can’t learn from the scientific studies being performed. And it doesn’t mean that contradictory studies are both wrong. But it’s a good reminder that observation isn’t limited to men and women in white coats.
You can’t catch me (nanny nanny boo boo)
Maybe you too scratched your head when you saw the studies from Princeton claiming money directly correlates with happiness up to a certain salary level, at which point the effect levels off.
There is a distinction: up to $75,000 a year, your happiness, or day-to-day emotional state, increases. But life satisfaction continues to climb with salary, regardless of the absolute value of your earnings. So if you make $25,000 a year and get a 10% raise, you’ll rate your life satisfaction higher, even though you’re nowhere near that $75,000 bar.
In fact, and here’s the kicker, what really seems to matter is how much you make compared to everyone else. So if your neighbors all invested their life savings with Bernie Madoff, but you put your money in Apple stock, your life satisfaction would theoretically be through the roof.
What this study really is saying is that happiness stems from feeling superior to those around you. How screwed up is that?
The need to catch your breath
Going through the career design process, I spent a lot of time analyzing my desire for money. There’s no doubt I harbored issues of basing my self-worth, at least to some degree, on the value of my income generation. But I don’t think that’s the primary reason most people, myself included, think more money will make them happier. It has to do with options.
Imagine someone gave you a million dollars. Now you could take more vacations, longer vacations, exotic vacations even. You could own a vacation house. You could work some lousy paying job you love. You could stop working all together (but maybe not if you’re also taking long, exotic vacations).
What’s really tantalizing about money is that your life theoretically has a lot more options than it did before. The problem is scientific studies have also shown that while some choice is good, for most of us, having an abundance of options is nothing short of hell.
There are a number of reasons for this. One is opportunity cost–when you have to select one option of many, you are simultaneously not selecting all the other options, which your brain views as a loss. Daniel Kanheman, that same Princeton researcher who put a price on happiness, discovered we attach more psychological significance to losses (in this case, the opportunity costs) than the joy we get from what was gained.
Abundance brings other problems as well. A fascinating study performed in 1999 by CBS and The New York Times polled 1038 kids between the ages of 13 and 17 on whether their life was easier or harder than their parents.
Overall, 43 percent said they were having a harder time, 33 percent said they were having an easier time and 23 percent said it was about the same. […] affluent teenagers, whatever their race or gender, were substantially more likely than those from more modest homes to report that their lives were harder and subject to more stress.
When asked to be more specific, affluent teenagers “attributed it to a sense of too-muchness: too many activities, too many consumer choices, too much to learn.” We want more money so we can have more options, but it’s really easy for those options to morph into “too muchness.”
How did I get in this race, anyway?
Maybe you’ve heard the story about Chicago law professor Todd Henderson, who makes over $250,000 a year but still doesn’t feel rich. He said he felt like he and his family were “just getting by.”
Studies have shown “as wealth in the U.S. has increased, Americans have increased the number of hours they work; and happiness levels have remained basically unchanged. By contrast, Europeans have responded to economic gains by working less — and they’re happier as a result.”
Henderson thought he could buy himself time by hiring gardeners, nannies and maids. But those costs just meant he had to keep pulling in his salary, which likely meant he didn’t get a time savings at all, he just spent it at his office instead of cleaning his toilet. As Laura Rowley put it, “a luxury [was] transformed into a necessity.”
Don’t think for a minute Henderson is alone. Most of us make this mistake, just with smaller fortunes. The point is: unless you’re very deliberate about how you handle wealth, more money likely won’t improve your life.
Changing course
Money is better than poverty, if only for financial reasons. –Woody Allen
When you boil it all down, there’s only one way money is going to make you happier: if by earning more, you work less.
Previous generations interpreted that as earning and saving during your youth so that you can safely retire in your elder years. That strategy only works if you’re comfortable being really satisfied with life, ummm, later. Tim Ferriss and other devotees to lifestyle design define it as earning money by doing what you enjoy (and therefore not calling it work)–a definition I can live with.
In order to turn either into reality, there are a few things you’ll have to do first:
- One of the best things you can buy with money is peace of mind by creating a safety net of funds. The question is: how big a reserve do you need? I got trapped into thinking I had to work high paying jobs so I could maintain my current rate of saving, even though I’d already built up several years worth of salary. Resources for responsibly reducing your debt and building a safety net are Adam Baker’s ManvsDebt and Jamie Tardy’s Eventual Millionaire.
- To avoid the Todd Henderson trap, you have to prioritize your needs. Focus on what really makes you happy, not what makes you look successful. I realized two things made up the bulk of my happiness: food and family (yes, I’m counting my cats as family). I made sure I had “non-negotiables” in my career design process focused on those elements.
- The last step? Measure what you want to improve. If you prioritized travel in step two, keep track of how many trips or vacations you take each year. For me, I wanted stress-free family time. Every time I get irritated when my daughter stops to pick up an acorn on the way to school, I give myself a black mark. It’s a powerful tool–use it wisely.
But my best advice? Experiment. If you don’t want an ordinary life, why design yours according to the actions of average people?
Photo courtesy of Mike Baird on Flikr. Huge thanks to readers Laura Burger and Kevin Gluck for sending me the articles that inspired this post.
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The best copywriters in the business tell me I’m supposed to include a call to action every time I write, like “Subscribe!” or “Share this on Facebook and you’re sure to find a dollar bill in your pocket!” Frankly, I think the people who read and respond to my blog are smarter (and better) than that. If you feel the same way, and you’d like to have my writing delivered to your inbox or RSS reader the moment a new post goes live, please–subscribe. And thanks for not making me go all slimy on you. I think that’s something we can both appreciate.
Great piece… nice summary too. The link below provides some more background on being overwhelmed by choice, and the human tendency toward competition or keeping up with the Joneses. Enjoy!
http://www.ted.com/talk/barry_schwartz_on_the_paradox_of_choice.html
Tony,
Great video. Many of the ideas in this post were inspired by Schwartz’s article by the same name, which is linked to in the post. I loved the line in the video “Everyone needs a fish bowl.” Terrific. In fact, I think this is exactly why so many are dissatisfied with their careers. When something goes wrong, it’s easy to regret your career choice and engage in some classic “grass is always greener” kind of thinking. That said, it’s well worth the time defining your own fish bowl.
Thanks for the link. I couldn’t get yours to work, but found the video easily enough. Here’s one from TED if anyone else wants to watch:
hi friend how are you i hop you are fine i am a man i live in the Gambia west Africa i like to have good friend in my life so we can see more i see your very nice message. i work in a craft market in the Gambia in a town call brikama the craft market
Hi Tony – the link didn’t work????
For some reason, the link I posted in my comment isn’t showing up. On the TED site, just put in Barry Schwartz’s name. It should pop up.
A throught-provoking piece that gave me a moment to retrace my own steps. Oddly enough, there was no time in my career when I ever worked for the money. As a result there were times I worked for a pittance and other times a lot. I was always much more interested in the work I was doing and what I was discovering about myself and the business world as a result. I was amassing insights rather than income. I considered those insights survival tools!
That said, I had bills to pay and things I wanted to own and do. That never changed my interest in the work but it influenced what I said “yes” to. For me the issue was never about the money at hand but my ability to earn more when and if I needed it. Options change everything because you never feel trapped. At least that’s how it worked for me.
For me it wasn’t about finding a way to earn more by working less. It was about finding a way to attract more revenue from work I loved to do, no matter how hard it was.
This was a fascinating piece, Jen. You spoil your readers every time, especially me! Thanks. ~Dawn
Dawn,
I probably should have been more clear that when I said you needed to find a way to “earn more by working less,” I was applying Tim Ferriss’ definition of work here. As I admitted in my Career Design Part I post, I’m working more than ever, it’s just that I’m largely doing what I want to. I’m not down to only 4 hours of “work” a week yet, but I’m a heck of a lot closer than I was! So yes, I completely agree with you–finding a way to get more revenue from what you love to do is a better way of saying it.
But I think your other point is valuable too. Priority setting and knowing what you want to say “yes” to is a big factor in satisfaction too. There really is too much of a good thing!
Thanks for YOUR great insights! I feel lucky to have such smart readers!
A smart writer begets smart readers. I really didn’t take issue with your point as I believe it is applicable to many. It took me a long time to get to my own balance point and understanding of how I tick when it comes to work.
I read Tim’s book and understand his premise which is particularly applicable to people who seek time for things other than what would be considered “work.” As a bit of an oddball, I generally choose work–my work that I love doing–over play. There is something so satisfying about getting things done, discovering new insights, delivering a service that someone else needs: That is an elixir for me. I grant that I’m in the minority.
Thanks for your great response. I can see that you are writing like a house of fire and we’re all better for that! ~Dawn
LOL–a house on fire is a good description! I’m enjoying it, but definitely looking forward to the holidays, when I’m going to take a break. I totally hear you on choosing work that you enjoy over play. I think you would find that Tim Ferriss is the same way. He just calls work that he enjoys “play.” Clearly I feel the same. 🙂
Thanks, Sherry. It was really difficult to sum up that much research, and in the end, that’s probably more from my gut than anything. Glad it resonated with you.
Jen, I love that call to action:) We might be clever but that doesn’t mean we don’t need a little reminder of kick up the pants from time to time! Thank you.
There are really too many interesting points here to address. But let me pick one:
“What this study really is saying is that happiness stems from feeling superior to those around you. How screwed up is that?”
It is screwed up but what’s most screwed is people seem to compare themselves to pictures of models in Vogue with airbrushed bodies and designer accessories – or to celebs cavorting on beaches, on super yachts or at parties. Now if we pampered developed world dwellers all start comparing ourselves to a subsistence farmer in Zimbabwe with no income, transport or healthcare, many sick and hungry children and a drought threatening I think we should all feel much happier:) And when we’re happier we can start spending more time thinking about how we can help other people like Zimbaweans who really have drawn the short straw in life.
Annabel,
That is such an eloquent way to exemplify the point. We make fun to Todd Henderson, but all of us in Western society have turned luxuries into necessities when compared with Zimbaweans. Of course, you know that because you lived it. Most of us have fully adapted to our priviledge and take it for granted (myself included). Thanks for the great reminder!!
This post hit close to home for me in several ways. My relationship with money has been an interesting part of my life. First, I was raised without any responsibility or awareness of money. It’s not that we were rich, but somehow I pretty much got what I wanted and never had to earn anything. This did not make me a happy kid! I knew from an early age that money does not buy happiness.
So when I had kids, I raised them to be able to be good stewards of their resources. They were responsible for their own money and had to buy everything for themselves except food, housing, and education. In the summers, they were expected to work or volunteer. As young adults, they are so much more mature and responsible than I was at their age.
Although I am a person of modest means, I am following Warren Buffett’s philosophy of not enriching my kids. I am ensuring their education and a small cushion. Beyond that, everything I have will go do charity.
And I am at a transition point in my own life as I consider early retirement. The Tao Te Ching says, “He who knows enough is enough will always have enough.” I have loved my job, but I’m ready and eager to move into new areas in my life. It’s scary to give up the “security,” but I see that as limiting fear with no real basis in my financial reality.
So thanks for a great reminder to keep things in perspective and go boldly forth!
Galen,
Yes, it sounds like you are at the perfect moment in your life to go boldly forth! I look forward to hearing more about your journey. I’m excited for you!
This puts a name to what I’ve been trying to tell my dad. He’s deeply in debt, and continues to suggest jobs to me that would bring in a substantial amount of cash, but would leave me with little to no free time to do the things I enjoy. He keeps telling me I need to make some sacrifices in order to have the life I want.
I’ve noticed that as I continue to add to my savings, and do side jobs that are more fun than they are work, my satisfaction with the salary from my day job increases.
Great post!
Erica,
Yes, there’s considerable resistence, especially from parents, when you try to do something unconventional. You can’t blame him–he’s a product, as we all are, of the thinking of his generation. I give Gen Y a huge amount of credit in my own epiphany. Without folks like Tim Ferriss and other young explorers, I don’t know that I ever would have thought to make a career leap. But I’m happy I did–and that this blog can serve as a supportive community for like-minded individuals. Glad you’re here!
Exactly–it wasn’t until I started finding people like Tim Ferriss and yourself and others that I realized there was another way to do life and my career. So thanks for being here!
Erica,
You just made my day! I think you’re the first (or one of the first) to come back to respond to my response to your comment. How else are we supposed to have a conversation, darnit?! Thank you!!
And…you’re welcome. LOL
> what happens in the lab often stays in the lab
Beautifully put.
I’m a fan of bridging the state of the art with the stage of the practice … applied research in action … where the rubber meets the road.
Yes, and I should say that science is moving in that direction too. Many psychologists are teaming up with sociologists and anthropologists to measure “behavior in the wild.” And then you’ve got economists like the Freakanomics authors doing real experiments as well. It’s an exciting time for the science of human behavior. (Sorry if that was geeky–but it’s true!)
The bottom line you helpfully draw here is one that is glossed over FAR too often in discussions of wealth. (And media coverage of psychological studies.) What matters most about our actual income is never what we expect. It’s a relative issue (keeping up with the Joneses) and an issue of consumption (as we earn more, we consume more, and our ratio never changes– thus the poor $250K earner).
I’ve been lucky so far. Not in earnings. (Hardly!) But in learning to look at work as something I do for its own sake. As long as I could afford cat food, fancy cheese, and the occasional movie night, I never paused to worry about whether I was keeping up with anyone. I realize folks will disagree with me on this, but I think part of it was living in New York. You accept that life is vastly different for everyone around you. You reduce your belongings to fit in your small living space. And although you may have a shoebox apartment and no car, the diversity of city life reminds you constantly that (a) you’re lucky and (b) the penthouse is the limit. In other words, the diversity of choices and possible outcomes always helped me see straighter.
I don’t find the same to be true in San Diego, for a variety of reasons, and as I age, I find it more difficult to ignore the various outside pressures that affect our happiness– and our relationship with our cash flow. It’s interesting, isn’t it? And because of my own economic instability at the moment, I’m feeling nostalgic for that tiny apartment that I filled up with dreams, not stuff.
Ah Lindsey, now that’s the poet in you coming out. I love this: “I’m feeling nostalgic for that tiny apartment that I filled up with dreams, not stuff.” And maybe that’s why money rarely makes us as happy as we think it will. What makes life exciting, at least for me, is having a pocket full of dreams to work on. And not a one of them gets easier or closer to realization just by getting an injection of cash.
That said, I still think the primary benefit of money is peace of mind, of knowing you can survive the unexpected. It’s especially true when you’re trying to overcome the fear of trying something new. Having a reserve can help quiet the mind when you have to ask, “What’s the worst that could happen?”
Great comment!
What a thought provoking post! – I do feel it’s easy to fall into the simple one sided mind set that more money means more happiness. It’s nice to have a swift kick in the head, like this post, to remind us of the many sides of money, hours worked, fulfillment and happiness.
Your advice rocks! “If you don’t want an ordinary life, why design yours according to the actions of average people?”
That was my favorite line from the post too. Was rather proud of myself for that. Happy to do all sorts of swift kicks to the head as long as you promise to get back up!
I agree with everything you wrote and love that you sited the “happiness/money” Princeton research. For a long time I was like you – socking it away; and now…we balance. Hubby’ paycheck pays the bills. My paychecks are “split”. I put 25% towards CC bills – we use CCs for health, weddings, bday gifts, etc., 25% in a “savings for travel / fun things” account, 25% in stock portfolio / savings, 25% to “live on” money – everything from food shopping to entertainment to dog food. Seems to work for us. Unfortunately, I bought my condo in FL at the height of the market when I was 23 yrs old. It was $250K back then; we owe $195K still…and it’s ONLY worth (comps in the area) $75K now. Gotta love the housing market.
One other thing you didn’t mention in the above post is how the people who “have” money, pay their bills on time, etc. get PUNISHED for doing so. Using the housing market as an example – if I was about to foreclose or I did not have money in savings, etc. I would be able to “short sell” my house – or sell it and not have the bank come after me for the money. However, because we do have savings, money, etc. we are unable to apply for any of the policies that have come out to “help” people who are ‘underwater’. It sucks because we have to pay 2 mortgages (we dont live in our FL house), but….oh well.
Jamie,
Yes, the housing market has been hard. We still haven’t gotten an offer on our house in Ohio, which has been painful. We get comments like “Lots of house for the money,” but no offers. And as someone who has recently embraced minimalism, I can’t blame them. Living in that house helped us realize we didn’t need that much space either.
I hear you on the penalties for being fiscally responsible, but one thing you can’t put a price on is stress. While policies may favor those who made bad decisions in the first place, I think those people are very, very stressed as well. My situation is costly, but I prefer it to the alternative.
Wow Jen, I enjoyed reading all the comments as much as the post! You do have a way of making us really think.
As for me, I have been dirt poor and I have had some wealth and I can tell you that money has nothing to do with happiness. I’ve seen people completely living a lie to ‘appear’ to be keeping up with the Jones’, only to lose most of their worldly possessions. It is such a waste and also a terrible lesson to the children.
Happiness comes from within.
I also have to tell you how much I LOVE your final paragraph about subscribing! I may have to plagiarize that somehow.
Thanks for an excellent post!
I totally agree–the comments are the best part of this blog! And I take that as a compliment, not a threat. LOL
And you are more than welcome to steal that paragraph. I was saying something along those lines to Jamie (below) and she told me I should just put it on my blog. So I did! Not sure if I want to include it on every post or not, but I do think it helped. Glad I could give you a smile.
Jennifer, another very useful and thought-provoking post from you.
You have brought new insights to me as I had always believed that most people would rather be rich and unhappy, than be poor and unhappy.
From what you have said, more wealth brings more stress through more options and perceived losses, so perhaps it’s better to be poor if your ultimate quest is to find happiness.
As for me, I would rather have the options that greater wealth brings:-)
PS I too love your final paragraph. Good for you!
PPS And I too may plagiarise (palgiarize) it:-)
So glad you liked the post. You can’t imagine the research that went into writing it–felt like a mini-thesis! Anyway, I think we’d all rather have the options that greater wealth brings. That’s why I love that Woody Allen quote. But I think there’s a tremendous amount of value in knowing how much wealth (and options) you really need. There are trade-offs there and you just want to be sure you’re making them consciously instead of letting society make them for you. But hey, if you can make huge sums of money doing exactly what you love, yeah, go for it! But I suspect most will find they just keep filling the coffers of the bank with a lot of extra money that wasn’t really necessary. Or maybe that’s just me. 🙂
P.S. Plagarize at will!